Measuring Your Real Net Worth

Net worth is an important topic, but not in the way it’s usually discussed. We all know about net worth – it’s about assets and liabilities, and hopefully the assets are bigger than the liabilities.

But here’s the problem. Looking at net worth in financial terms focuses us on a lagging indicator. It tells us how we’ve done in the past, but it offers only limited insight into how we will do in the future.

Is there a different way of thinking about net worth? I believe there is, a way that’s much more insightful and help us to focus on what’s really important.

I believe that our best measure of net worth is our network. I say this with some hesitation because that statement can conjure up images of transactional networking: how many business cards have you been able to collect or, in somewhat more modern terms, how large is your Facebook or LinkedIn network?

I’m talking about a very different kind of network. It’s not about who you “know” but instead who really knows you? That moves it from a transactional collection of names and contact information to a much deeper focus on long-term, trust-based relationships.

If someone really knows you, that means you’ve been willing to be vulnerable with them. You’ve shared not just your strengths and accomplishments, but your failures and fears.

That’s one way of measuring of net worth in terms of your network, but there are other dimensions that need to be assessed. It’s one thing if someone really knows you, but it’s even more valuable if they actively use that knowledge not only to provide you with support and encouragement when the going gets tough, but also to challenge you when you’re missing opportunities for development and impact. To what extent are they actively helping you to achieve more of your potential, even if it takes you out of your comfort zone?

In that context, there’s another dimension that matters greatly. How diverse is your network? As we know, diversity takes many forms including gender, ethnic origins, and age. Underneath all of that, the question to really focus on is the cognitive diversity of your network of relationships – what are the backgrounds, experiences and perspectives of the people within your network and how diverse are they?

We’re all aware of the growing risk of “filter bubbles” that insulate us from different perspectives. To what extent are our networks helping us to escape those filter bubbles and exposing us to different ways of viewing the world?

There’s yet another dimension to explore in assessing your network. To what extent are the people in your network questing and risk-taking, always looking for new opportunities to increase impact, versus defensive and risk averse? In my experience, people with questing and risk-taking attributes generate and amplify energy within their networks, while people who are defensive and risk averse tend to drain energy.

Amplifying your network

These kinds of networks can be very challenging to cultivate, especially if you’re an introvert like me. I actually find that writing has been very helpful to me in building my network – it draws out people through the “power of pull” who are intrigued with my questions and ideas and who seek me out, people that I never would have found or connected with in my day to day interactions.

My passion also helps me to build a richer network because it encourages me to ask questions and ask for help, rather than just sitting here and pretending that I know all the answers. I’ve found that people who have cultivated the passion of the explorer have much richer and more diverse networks because they are not just willing, but compelled, to be vulnerable because of their overwhelming desire to venture beyond what they already know.

Having said that, I would welcome advice and insight on how introverts (and others) can be more intentional about cultivating the kinds of personal networks that I’ve described above. It’s an area that I’m still exploring.

The growing importance of networks

So, why does all of this matter? It matters because we’re living in a world of mounting performance pressure – the Big Shift, as we’ve come to describe it. It’s a world where, no matter what credentials, accomplishments and financial net worth you’ve accumulated in the past, you'll be increasingly challenged to reach higher and higher levels of performance or risk being marginalized.

In that kind of world, you’ll need to learn faster and faster. No matter how smart you are, you’ll learn a lot faster if you’re embedded in a personal network of people who share the attributes that I described above. And the larger your network, the faster you and everyone else will learn. This is why your personal network is your best leading indicator of net worth in financial terms.

This isn’t just about pressure, it’s also about extraordinary opportunity. And it’s not just about financial opportunity in terms of creating more and more value and reaping the financial rewards from that. At a much more fundamental level, it’s about the opportunity that we all have to achieve much more of our potential. It’s also about the opportunity to live much richer lives, enriched by the deep relationships that emerge among people who share the desire to achieve more of their potential.

Can these networks scale?

I can hear the skeptics saying that this is all very interesting, but these kinds of relationships can’t scale. We're all familiar with the Dunbar number. If we’re talking about really deep, trust-based relationships where we know each other in our full complexity, there’s a limit to how many of these relationships we can sustain. Agreed. But this is where I have a feeling that some of my perspectives on creation spaces can come into play.

Based on the research that we’ve pursued at the Center for the Edge, I’ve come to believe that there’s a distinctive organizational form that can scale and accelerate learning for all of the participants. Briefly, the core unit of a creation space is a group of 5-15 people who develop deep, trust-based relationships with each other. But that core group is then connected into a much broader network of other groups who share a similar quest for increasing impact and who can become resources to address particularly gnarly questions. These creation spaces can be found in everything from extreme sports and social movements to scientific endeavors and music.

So, the key is to find and cultivate that small group of people that you can work with to achieve greater impact. But, don’t stop there. The key is find a way to connect that group into a much broader network of similarly motivated groups that can become resources to draw on when you’re wrestling with quests that are particularly challenging.

Is that all there is?

Not at all. Like most things in life, this is complicated. I can also hear the skeptics asking about the importance of “weak ties”, citing the work of Mark Granovetter. In some path-breaking research, he discovered that often the greatest value to a participant in a network comes from people with weaker ties, not the people with the deepest relationships. This is because the people with weak ties often have connections and insights that are more far reaching and diverse than might be shared among a small group of people with rich connections, but who often share many of the same interests and relationships.

While striving for more diversity within your core group can help to compensate for this, there will always be room for, and value in, “weak ties.” Looser and broader connections can always be helpful, but not at the expense of the deep, trust-based relationships that will help to accelerate learning and performance improvement.

But what about the liabilities?

If we’re talking about net worth, assets are balanced by liabilities. So far, we’ve just been talking about another way to frame assets in thinking about net worth. What are the liabilities to offset the assets?

There are many. Perhaps the greatest liability is our tendency to spread ourselves too thinly across too many activities, so that we can’t invest the significant time and effort required to really build, sustain and nurture our network of deep, trust-based relationships. In this context, just building a larger and larger network of superficial and transactional relationships can consume our time and make it more challenging for us to focus on the people and relationships that really matter. We all need to take a hard look at the growing demands on our time and find ways to free up the time required to build the networks that will really matter.

Other liabilities are more personal. Most importantly, they tend to involve the fear, insecurity and risk averseness that prevents us from being vulnerable with others. These feelings are completely understandable and natural in a world of mounting performance pressure but the paradox is that, the more we fall prey to these feelings, the more likely we are to fail.

Bottom line

Your real net worth is your network. If you’re not cultivating your personal network in ways that draw out more of your potential (and the potential of others), whatever financial net worth you might have today is likely to diminish. This is the leading indicator that will give you a better sense of your ability to achieve more of your potential, and to reap many different forms of rewards along the way.

[Full disclosure: I wrote a book called Net Worth almost 20 years ago. In that book, I focused on yet another way of thinking about net worth: focusing on the net worth that is latent in the personal data about ourselves and enlisting the help of trusted agents to help us maximize that net worth. It just goes to show that there are many ways to think about net worth.]

Great post, John. Wanted to get your thoughts on a question related to creation spaces and the core group of 5-15 people, you mentioned?

In your experience, is this core group of people static or can people change and yet the group quality can be maintained? For context, I wanted to share a client situation where they had a core group of people (e.g., founders, early employee, etc.). Over time, the core group shrunk (co-founders had issues, early employees left, etc.) and the client has since struggled to re-create the original mojo. Ofcourse, a core group still exists and it is also connected to the external network but things have not been the same. Its smaller now, not as high quality, etc. Have you seen successful examples where the quality of core group has/can be maintained, even though the people comprising it change? -Nitin

Clarification of my previous comment. At the beginning you certainly write "Looking at net worth in financial terms focuses us on a lagging indicator." But then, you say:

"This is why your personal network is your best leading indicator of net worth in financial terms." I change now my question to "Why in financial terms?"

My understanding is based on an adjustment to Peter F. Drucker question: “What does ‘capitalism’ mean when Knowledge governs – rather than Money?” I now say “What does ‘capitalism’ mean when talent governs – rather than Money?”

"When it comes to success in business, one measure alone can accurately predict the future –wealth of talent. The more talent wealth an organization has, the more successful that organization will be."